New Container Standard Changes All the Rules

Feb. 1, 2003
An interview with Gordon Fuller, director of e-business group for Covansys, an international consulting firm, What business is Covansys

An interview with Gordon Fuller, director of e-business group for Covansys, an international consulting firm,

What business is Covansys in?

Covansys is a consulting firm with business in e-government for retirement, child welfare systems and other custom governmental work. The firm does finance and health care with custom solutions. The firm has a big presence in India for outsource services with some clients in transportation/logistics and supply chain and retail in foodservices. Located in Detroit, Covansys is involved with Ford, GM, Chrysler Tier 1 through Tier 5 suppliers for automotive manufacturing.

What is the new Container Security Initiative?

Phase 1 of the Container Security Initiative (CSI) was implemented by U.S. Customs on December 2, 2002. The CSI has four objectives:

1. Establish security criteria;

2. Prescreen shipping containers before they reach U.S. ports;

3. Inspect high-risk containers;

4. Use smart and secure containers that protect the integrity of contents and transmit accurately that integrity has been lost.

The first phase is to provide 24-hour advance notice from the final foreign port to the Customs Service for all goods being shipped to the U.S. In terms of the shipping manifest, there were previously permitted shorthand descriptions like Freight All Kinds (FAK) or General Department Store Merchandise (GDSM). The consignee, the person to whom the cargo is being sent, could be identified as a bank or an agent. These shorthands are no longer permitted under these new security rules. Shipping manifests must now be specific, timely and complete in declaration of shipper, cargo and consignee.

The good news is that the Customs Service under the Department of Homeland Security already has in place an automated manifest system (AMS) to take that information. New is adding the specific descriptions of cargo. It used to be that the ship could not sail unless the shipping manifest was approved, but now the requirement is the 24-hour advance shipment notice before cargo leaves the port. For more information about this new regulation, go to

What is a high-risk container and how are containers classified high-risk?

Objectives 1 and 2 are being met with the 24-hour notification rule. The physical security of the containers and the boxes within them is a concern of Objective 4.

Customs will reclassify containers that don’t meet the standard as high-risk. If one of your containers fails, then the rest of your cargo will be subjected for an undetermined length of time to extremely close inspection. That will mean increased delays in your supply chain.

Here’s what makes for a high-risk container:

1. If you fail to provide 24-hour notification, your cargo will likely be inspected or questioned, with your cargo likely left on the dock.

2. Rerouting your cargo to deliberately avoid CSI ports. If you try to reroute your cargo through Mexican or Canadian ports to evade CSI regulations, Customs will find out and will go through your cargo with a fine-tooth comb.

When it comes to physical security of containers and inspection, it’s a complicated issue about how you seal the container. We’re not talking an unbreakable seal, but if the seal is broken or if the container contents changes, then the seal must communicate those facts.

How is the CSI a response to 9/11 concerns?

CSI is in response to 9/11 issues. The good news is that the new regulations are making the existing customs system operate in the way they were intended with more attention paid to details. Before the physical threat to the U.S., for commercial reasons and because the standards weren’t enforced, companies had no financial incentive to meet these standards.

How will CSI affect consolidating cargo?

If you’re a retailer and you’re consolidating cargo with blouses coming from Malaysia and sweat socks coming from Thailand, they will be consolidated in Hong Kong and sent on the next vessel. You’ve booked containers, and if the socks don’t arrive, you’ll just put shoes in there instead. In the past you didn’t have to worry about such changes as you labeled the container Freight All Kinds. But this won’t pass customs any more.

What makes for a secure container?

This hasn’t yet been decided by Customs. My opinion is that having spoken to people in the port business and in the government, the issue is there is no single or combination of scanning and inspection technologies today that allows the kind of high throughput that a port needs. You can X-ray, have particle sniffers -- but they don’t catch everything.

The ideal is to ensure that at container loading the contents are safe, and to maintain that seal throughout so that subsequent inspection is unnecessary. That’s what the government means by a smart and secure container. To achieve this with today’s technology, the best alternatives are:

1. A secure loading area with limited access and video monitoring, and background checks on workers.

2. Tie the seal to the contents. This is where RFID chips apply by tying the RFID signatures on all the container’s boxes with date and place of container loading with an algorithm encoded in the seal. If the seal is broken or if any of the contents don’t match the RFID, then the seal and contents aren’t synchronized -- evidence of tampering. RFID tags can be read simultaneously through the container walls.

What about bar codes and the new CSI standard?

The difficulty with bar codes and other Global Trade Identification Numbers (GTINs) is that bar codes are sequential and must be visible to be read. Usually, because these GTINs and bar codes are scanned at loading and unloading, this has not, up to now, significantly slowed shipments.

Another issue is that the bar codes and the UPC format in the U.S. only identify to the SKU level. It identifies the company and kind of product -- not style, color or size. Company identifiers are at least six digits or more, and with all the permutations of product kinds, there just aren’t enough digits left in the 12 digits, or even in the new EAN 13-digit bar code to provide enough detail to meet the new CSI regulations. The issue for CSI is a complete audit trail. They need to know where the cargo came from and what its routing was.

In tracking exceptions to ensure continuing security of containers in transport is a GPS system that will monitor the container’s route. This is just an idea. If you do this, even in America, if you’re going from Boston to New York and there’s a travel jam, a trucker may take an alternative route. Does taking a different route mean that a container is compromised?

So the issue of tracking cargo and where it has been comes down to at what level you will track your goods. Typically, the pallet or carton level would be tracked. But there are two levels of integrity to consider, both containers and palletloads. The palletloads may be shrinkwrapped, but they hardly have the level of security that is appropriate for CSI. If you move goods between pallets and cartons, even within the same shipment, if you destroy the integrity of the pallet, you destroy the integrity of the shipment.

I don’t think the 12- or 13-digit bar code will allow you to track down to the item level. But RFID tags with 96 digits with Electronic Product Code standard for RFID chips allows for more digits and the identification of every single item, place and date of manufacture, transportation route and final destination.

This would allow Customs agents on the dock to avoid having to scan a product code at the dock and then asking the sender where the unit came from. Instead, the unit itself would tell you all this information.

How do the 13-digit EAN code and the new 14-digit UCC suggested standard fare when it comes to the CSI?

The 13-digit EAN 128 bar code is a pre-9/11 standard. A 14-digit GTIN standard was proposed by the UCC. More information on this standard is available at

The 2005 Sunrise Date was established by the UCC. The trade organizations suggested a 14-digit code including the UCC and EAN (European Article Numbering) and JAN (Japan Article Numbering). This Sunrise Date is also a pre-9/11 solution that doesn’t reflect the CSI issues involved. I see applying RFID chips to all products as an answer to the security needs created by 9/11 and the CSI.

In my opinion, the Sunrise Date recommendations will be superseded by the events of 9/11 and the Department of Homeland Security response. But there will be business needs and government security needs that will have to be hammered out. Homeland Security is leading the creation of new standards. I see that RFID chips are the most promising solution when combined with effective physical security for container loading areas. They won’t provide a tamper-proof seal but a seal that can always tell you whether it’s been tampered with. RFID tags would be attached to each carton in the container. The seal would have some check sum encoded in it that totals the items within the container. I think that the bright boys at the National Security Agency could come up with the right algorithm in their sleep for this application. Physical security has to take place in foreign countries at the loading dock end.

Are there firms that are coming close to the kind of data security that CSI requires?

Wal-Mart has recently required that all its suppliers give data electronically and in a standard format in an AS/2 format so they can get data on their shipments at any point in a timely fashion. The question is at what point in the supply chain are the GTINs attached to an item? In some cases, the customer’s agent in a foreign country creates the GTINs and gives them to a manufacturer to affix to the product. At that point, is the agent or the manufacturer able to specifically identify the GTIN with the item and what other information will be associated with the GTIN? There are shipping documents, export declarations and a whole menagerie of documents flying back and forth.

Another possible benefit of CSI is to get rid of separate sets of documentation for every country and use just a single set of documents to deliver when shipping to the U.S. This may be a savings to business as a result of CSI.

Wal-Mart is in the lead in tracking its cargo today, and it’s tracking to the most precise level it can.

What’s the most important thing to remember about the CSI?

CSI is simply asking the shipping systems already in place to act as they were intended. Companies can go under if they lose control of their supply chain. CSI can help companies get better control over their information, sooner and to a better level of detail. In today’s world, traffic will be rerouted, but hopefully not delayed.

Even if you pass along the cost of maintaining buffer stocks of your goods to your suppliers, cargo still has to move. Even if your suppliers have to manage the delays instead of you, delays will still happen. There will always be tight capacity constraints on cargo at peak times. If you want to get cargo through at these bottleneck times, you have to be smarter and follow the CSI guidelines that what you say is in a container stays in the container, and that you can prove it. Proving that is the hard part with a deeper level of detail on tracking.

That’s why you have to require that your suppliers have standard shipping routes on land and on sea and require their own providers like trucking firms to prove the integrity of cargo during the time they are handling it. If a container is 24 hours late, was it diverted, was it highjacked, or did the driver take a different route? These are the kind of questions that CSI is going to ask now. If you don’t have a good reason why the container was late, it will likely be inspected. That means that the late container will likely be sitting on the dock when the rest of the shipment sails off.

What’s the most important thing about the 2005 Sunrise Date for the UPC 14-digit bar code standard?

When you re-engineer your systems to take advantage of CSI, keep in mind that under any circumstances you need more information in your GTIN. The Sunrise Date emphasizes that if you’re on the UPC 12 standard, it’s not enough. If you’re on a custom system, you risk being a foot-pound shipper in a metric world. My opinion is that you can do better than the new UPC standard in this post 9/11 world.

This new UPC standard was the least-cost solution for adding more data by allowing you to keep your existing bar code technology. You don’t have to change your tracking or management structure. All you are doing is adding two digits, expanding the field of your database, and you’re set.

But now with CSI, you do need more:

• Management oversight;

• Remediation strategies like rerouting and reordering;

• Visibility into your cargo shipment before it’s on the water toward the U.S.

The UCC standard didn’t address this new CSI standard or its ramifications.

-- Christopher Trunk, managing editor